Can You Afford College For Your Child?

Every year reports documenting runaway college costs crop up like clockwork. In its annual study of college costs released in September 2001, The College Board found that tuition jumped by about 5.5 to 7.7% for four year colleges and universities during the 2000/2001 school year, once again outpacing inflation. Most parents need only recall their last tuition bill to mutter knowingly, "just as I thought."

Despite its rap as a premier pocket book buster, college is one of the best deals going. What separates the skeptics from the believers is only a dash of Wall Street savvy. Too often families consider college a short-term expense, forgetting that its long-term returns make it a first-rate investment. Forbes magazine estimates that a college degree yields about 13% or 14% a year after inflation, trouncing bonds and beating most stocks too. (And that’s to say nothing of the intellectual and personal gains college-educated individuals reap.)

To put it in real terms, let’s suppose that Cindy opts to attend college while Bobby decides to go to work after high school and invest what would have been his college tuition money. Even though Bobby’s got a big head start, in all likelihood, Cindy will still come out miles ahead. And that’s after the cost of tuition, room and board, as well as the earnings she lost during her employment-free college years are factored into the equation.

The reason for this dramatic disparity is college grads enjoy a major earnings advantage over those holding only a high school diploma. According to University of Chicago economist Kevin Murphy, in 1980, a college grad earned 43% more an hour than those with a only a high school education. By 1994, the figure was up to 73%. College-educated women win even bigger according to Department of Education statistics.

Generally, this income gap, also called the college premium, starts small, barely registering among 23 year olds. By age 30, however, the difference between the median income of college and non-college educated workers is around $15,000 and growing.

Even when college grads end up working at 7-11 or Al’s Body Shop, chances are they’re making better money than their non-college educated counterparts. A team of researchers from Harvard and MIT found that men holding college degrees make about 8% more in "high school wage" jobs, while women holding college degrees make an incredible 40% more.

Finally, college graduates are more likely to be employed. Among 25-29 year olds, they face an unemployment rate of only 3%, as compared to 9% for their non-college educated peers.

So a college education is worthwhile. Can you afford it? According to U.S. News & World Report, 50% of students receive aid at public and 72% receive aid at private schools. In addition, the average private college or university is giving back 36.7% of its published price as financial aid. That’s up 40% since 1990.

If you plan correctly and do the right things in the right way at the right time, finding a college which you can afford is not impossible. Campus Financial can provide the guidance and the assistance to make college an affordable reality.

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